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Majestic Wine ‘past tipping point’ as £1.5m loss offset by rising footfall and sales

Published:  15 June, 2017

Majestic Wine’s full-year reported profit before tax has revealed a loss of £1.5 million, set against a 15.8% rise in sales and 12% growth in the company’s customer base to 825,000 active customers.

Majestic’s boss Rowan Gormley said the company is “confident about the medium term outlook” having passed “through the most risky and cost intensive phase of our transformation plan”, while reiterating his goal of achieving £500 million sales by 2019.

Majestic issued a profit warning in September 2016, causing shares to fall by 25p, after a costly campaign to grow its Naked Wines online business in the US failed to deliver. However, sales growth of 26% at Naked Wines have subsequently boosted Majestic’s bottom line.

“Transformation benefits are coming through and our costs are naturally coming down as a result of us reaching the next stage of the transformation plan,” said Gormley.

Richard Weaver, buying and marketing director at Majestic, added: “[An] adjusted PBT (profit before tax), down to £12.9m, reflects increased operation costs going into the business last year, but these costs are now beginning to bear fruit.”

“We are pleased with the second half of the year … the customer uplift is equalled by a similar sales uplift, which reflects our aim to grow Majestic by increasing our customer base, not by opening more stores.”

Weaver highlighted the growth of multichannel orders, with 56% of group sales now coming from customers buying outside of the traditional bricks and mortar shops, with online playing a major part in this growth.

Majestic opened a new national fulfilment facility last year as part of investments that have also seen infrastructure and IT overhauls, which the company says are now beginning to pay dividends.

Weaver declined to be drawn on when Majestic could swing back into profit, but said: “We are comfortable with analysts expectations for the next couple of years.”

Majestic Full Year Results for the 53 weeks ended 3 April 2017

Sales up 15.8% on a reported 53 week basis, 11.4% on an underlying 52 week basis, driven by 12% growth in the Group customer base to 852,000 active customers.(1) Multichannel orders now account for 56% of Group sales

· Full year reported adjusted PBT down to £12.9m, reflecting previously announced transformation costs

· H2 adjusted EBIT up 51.0%, an encouraging performance in the first period where transformation costs are fully annualised and benefits are starting to come through

· Full year reported Profit before Tax was a loss of £1.5m, largely reflecting acquisition related non-cash charges

· Key transformation projects on track

· ROI on new customer acquisition in Naked Wines at 139% in H2, 83% for the year

· Reporting of Free cash flow and Net Debt were negatively impacted by short term timing of payments falling in the 53rd week which reverse shortly after the year end

· Final dividend of 3.6 pence per share, total dividend of 5.1 pence for the year